After hit man charge, developer puts company in bankruptcy

Dvorkin Holdings LLC, which has filed for Chapter 11 bankruptcy protection, owns this 21,135-square-foot medical office building in Palos Heights. Photo from CoStar Group Inc.

(Crain's) — After being charged in a murder-for-hire plot this summer, local developer Daniel Dvorkin now faces the wrath of creditors in a host of real estate investments.

Dvorkin Holdings LLC, the venture that owns the real estate assets of the Oakbrook Terrace-based developer, filed for Chapter 11 bankruptcy protection Aug. 7. The company lists assets of $69.8 million and liabilities of $9.2 million, but its debts will rise as unsecured creditors that have filed foreclosure suits naming Dvorkin Holdings state what they are owed, said Michael Davis, the venture's lawyer.

The venture owns stakes in properties across the Chicago area, from a 21,135-square-foot medical office building in southwest suburban Palos Heights to a commercial building at 3338 N. Clark St. in Chicago. One of Mr. Dvorkin's biggest local projects, a 250-unit condominium conversion at 1140 N. LaSalle St., was repossessed by its lender in 2010 and is not included in the filing.

Mr. Dvorkin was arrested in July on a charge that he tried to hire a hit man to kill a creditor who won an $8.2 million judgment against him. The federal charges could make life more difficult for the bankruptcy case by undermining Mr. Dvorkin's credibility.

“It's a cloud,” Ronald Peterson, a partner specializing in bankruptcy law at Chicago-based Jenner & Block LLP who is not involved in the case, said of the charge against Mr. Dvorkin.

Some creditors appear to be skeptical. In a late-August filing, lawyers for Akron, Ohio-based FirstMerit Corp. brought up Mr. Dvorkin's criminal case in a motion that said FirstMerit and other creditors cannot “possibly be expected to have any confidence that (Dvorkin Holdings) is acting in their interests in light of these drastic allegations.”

In its filing, FirstMerit also said 97.3 percent of the bank's assets were “likely” illiquid, in trusts or other companies, and noted that Mr. Dvorkin personally guaranteed many of the loans. FirstMerit sought to have U.S. Bankruptcy Judge Jack Schmetterer appoint an independent trustee to manage the Chapter 11 case.

FirstMerit's lawyer and a spokesman for the bank did not return calls.

Mr. Dvorkin no longer has a role in the affiliate that operates the Dvorkin Holdings real estate portfolio. Francine Dvorkin, Mr. Dvorkin's wife, fired him from the venture in mid-July because of the allegation related to the hit man, said Mr. Davis, a partner at Wheaton-based Springer Brown Covey Gaetner & Davis LLC. Dvorkin Holdings, the debtor in the bankruptcy case, is owned by three trusts, which benefit Francine Dvorkin, two of her and Daniel Dvorkin's children, as well as an entity owned by Ms. Dvorkin and the children, Mr. Davis said.

A former Dvorkin property manager named Loran Eatman has now replaced Mr. Dvorkin and is best positioned to handle the bankruptcy because he knows the company's portfolio well, Mr. Davis said. Mr. Eatman declined to comment. Ms. Dvorkin could not be reached.

Scott Frankel, partner at Chicago-based Frankel & Cohen who represents Mr. Dvorkin in the criminal case, reiterated his client's innocence. He said Mr. Dvorkin was free on bond, having put up a residential property in Lombard worth $1 million as security.

Public records show that the $8.2 million judgment against Mr. Dvorkin involved a defaulted loan tied to a Hawker 800XP corporate jet. A Texas venture, Texas 1845 LLC, won the judgment after buying the loan from Cleveland-based bank KeyCorp, which had sued Mr. Dvorkin in 2010 to collect the debt.

A KeyCorp spokesman declined to comment. A Texas 1845 executive did not return a call.

The Texas venture has since assigned the judgment rights to yet another entity, Asset Liquidators LLC, according to a DuPage County filing. Michael Waters, a shareholder at Vedder Price P.C. who represents Asset Liquidators, declined to comment.